Two recent announcements by PartyGaming, the online betting market leader, have caused share values in the sector to tumble. Within weeks of its flotation, PartyGaming issued a profits warning on the grounds that the expected growth in poker had not materialised. The subsequent flotation of Empire Online and 888 Holdings was muted in comparison to the hype generated by the PartyGaming IPO. The second announcement came this week when PartyGaming decided to cut relationships with ‘white label’ operators, including Empire Online. Investor confidence plummeted; shares in Empire Online fell 34% and PartyGaming was trading 40% below its flotation price.

Just when the online bubble seemed to have burst, Sportingbet - owner of the Paradise Poker site – stated that it saw no signs of poker play slowing and that it had been a record September, with growth accelerating. Pre-tax profits for the company to 31 July are £41 million (US$71.6 million), up from £5.4 million (US$9.4 million) the previous year. A third of Sportingbet business is from poker, and the number of daily Paradise Poker games is around one million. Online casinos account for another third, and sports gambling the rest. It is likely that there will be further consolidation in the online betting industry – Paradise Poker was acquired by Sportingbet last November.

The Internet betting exchange Betfair may still be awaiting much delayed news on a Tasmanian licence but it is not standing still. Today it will launch its Malta operation, having been granted a licence there in May 2005. At present the company, winner of the Queen’s Award for Enterprise in 2003, is based in London. However, an alteration to the tax regime may cause Betfair to relocate to Malta if the 15% gross profits tax is switched to a tax on players’ winnings. The Treasury has yet to make a final decision but will not want to drive betting exchanges offshore and lose businesses that provide both employment and tax revenue.

The commencement of Betfair operations in Malta precedes the outcome of a Government gambling review. The established bookmakers have been urging the Treasury to alter the tax regime for P2P betting exchanges, but they themselves are facing VAT charges on the lucrative FOBT machine revenue that has so far cushioned them from betting exchange competition. The result of the gambling review may be revealed at next month’s pre-budget report. Whatever the outcome odds, Betfair would appear to have it covered. (E-10.13.05)

© Copyright 2005 CasinoCompendium



>>> return to archives
>>> return to frontpage